Bangkok--Aug 19--Fitch Ratings
Fitch Ratings (Thailand) Limited has today assigned National Long-term ratings of ‘AA+(tha)’ to PTT Public Company Limited’s (“PTT”, rated ‘AA+(tha)’/‘F1+(tha)’, Outlook Positive) upcoming 15-year unsecured and unsubordinated debentures of THB4.118 billion due August 2020.
PTT’s ratings reflect its dominance in the Thai gas and oil sector, its strategic importance and function as a policy vehicle for Thailand’s energy security and development, majority state ownership and strong support, good senior management track record, as well as its solid cash flow generation. PTT enjoys a natural monopoly in gas transmission and distribution through its established network, secure demand via long-term sales contracts and thanks in part to the high entry barriers of the capital-intensive business. Through its subsidiary, PTT Exploration and Production Plc (“PTTEP”), PTT is one of Thailand’s major exploration and production companies, with the largest reserves and second-largest production. PTT offtakes and resells virtually all of Thailand’s natural gas and has the largest market share of LPG (2004: 37%) and oil (2004: 33%) sales. The gas interests are the main contributor to EBITDA, and cash flows from this activity have proved relatively stable thanks to long-term supply and sales agreements, a cost-plus pricing structure and generally less volatile gas prices.
The continued growth in gas demand and sustained high oil prices have continued to support PTT’s operating performance. PTT reported consolidated EBITDA of THB53.2bn in 1H05, up 42.8% yoy, thanks mainly to EBITDA growth from its gas business (up 26.1% yoy for PTTEP and 19.8% yoy for gas transmission and gas separation plants) and partly from the consolidation of Rayong Refinery Public Company Limited (“RRC”) since December 2004. On a consolidated basis, PTT’s debt and net debt declined from end-2004 to THB158.1bn and THB110.2bn at end-1H05, due largely to the completion of RRC’s debt rehabilitation in 1Q05, but increased from end-1Q05 as a result of dividends and capital investment. PTT’s leverage and coverage have remained strong with net debt to Last-12-Months’ EBITDA of 1.2x (2004; 1.4x) and EBITDA coverage of 12.3x for 1H05 (2004; 9.4x). PTT’s liquidity also remained very strong with a cash balance of THB48.1bn and a low level of short-term debt (1H05; THB10.8bn).
The ratings also take into account significant budgeted capital expenditure, volatile commodity prices and forex exposure as well as regulatory and political risks. PTT’s five-year investment plan is budgeted at THB212bn (USD5.6bn), 75% of which is for the gas business. In addition, PTT has earmarked THB20.3bn for an acquisition of 31.5% stake in Thai Petrochemical Industry Plc (“TPI”). Given a significant budgeted capital expenditure, particularly for 2005-2007, PTT’s net debt is expected to increase moderately, but PTT’s financial leverage should remain relatively low and its liquidity should remain strong over the next three years, due to its strong earnings outlook. Although TPI’s acquisition will benefit PTT’s petrochemicals and oil businesses, particularly downstream, it will increase the company’s exposure to the more volatile petrochemicals sector.
The Positive Outlook on PTT’s ratings reflects stronger-than-expected earnings due to rising oil prices and expectations that PTT will use its surplus cash to reinforce its core business while maintaining a conservative financial profile.
PTT was partially privatised and listed on the SET in 2001. Thailand’s Ministry of Finance still holds a 52% stake in PTT and is expected to retain a majority stake for the foreseeable future. PTT is the largest company on the Thai stock market, with a market capitalisation of THB649bn at end-July 2005.
Contact:
Wasant Polcharoen +662 655 4763
Orawan Karoonkornsakul +662 655 4766
Vincent Milton +662 655 4759
Note to Editors: Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated ‘AAA’ and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as ‘AAA(tha)’ for National ratings in Thailand. Specific letter grades are not therefore internationally comparable.
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